Shang­hai plant shows Tesla’s am­bi­tion

TESLA Inc recorded sev­eral firsts when it broke ground on a car man­u­fac­tur­ing plant in Shang­hai on Mon­day af­ter­noon. The 50 bil­lion yuan ($7.3 bil­lion) plant is the com­pany’s first factory out­side the United States and the first au­to­mo­bile pro­duc­tion project wholly owned by for­eign cap­i­tal in China.

An­a­lysts said the move marks the strong con­fi­dence the new en­ergy ve­hi­cle maker has in the China mar­ket as well as China’s com­mit­ment to fur­ther open­ing-up.

“This will be the most ad­vanced Tesla gi­gafac­tory in the world, and I be­lieve one of the most ad­vanced fac­to­ries in the world of any kind,” said Elon Musk, chief ex­ec­u­tive of­fi­cer of Cal­i­for­nia-based Tesla in Shang­hai on Mon­day.

“Gi­gafac­tory” is a term that orig­i­nated with Tesla’s planned bat­tery pro­duc­tion per year of 35 gi­gawatt-hours, ac­cord­ing to Zacks In­vest­ment Re­search.

“With the re­sources here, we can build the Shang­hai gi­gafac­tory in record time. We are look­ing for­ward to hope­fully hav­ing some ini­tial pro­duc­tion of the Model 3 to­ward the end of this year, and achiev­ing vol­ume pro­duc­tion next year,” Musk added.

Musk said he ex­pected the plant to fin­ish its ini­tial stage con­struc­tion in the sum­mer. Its goal is to have a pro­duc­tion ca­pac­ity of 500,000 ve­hi­cles per year.

The Shang­hai factory came to­gether af­ter China an­nounced in April it would re­move the cap on for­eign own­er­ship of com­pa­nies that build new en­ergy ve­hi­cles. China also de­cided to phase out the eq­uity cap on all au­to­mo­tive ven­tures by 2022 widely con­sid­ered one of the most far-reach­ing moves in decades to open up its car mar­ket.

Yale Zhang, manag­ing di­rec­tor of Shang­hai-based con­sult­ing firm Au­to­mo­tive Fore­sight, said Tesla’s Shang­hai plant sends an­other clear sig­nal of the coun­try’s in­tent to fur­ther open up to the world. “China said it and has kept its word.”

China’s new en­ergy ve­hi­cle mar­ket has kept grow­ing ro­bustly, while the coun­try’s auto mar­ket as a whole has been tepid.

In the first 11 months of 2018, China made about 1.05 mil­lion new en­ergy ve­hi­cles and sold 1.03 mil­lion, ac­cord­ing to the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers. That’s an in­crease of 63.63 per­cent and 68 per­cent year-onyear, re­spec­tively.

In the same pe­riod, the pro­duc­tion and sales of au­to­mo­biles in China were 25.33 mil­lion and 25.42 mil­lion, down 2.6 per­cent and 1.7 per­cent.

“It is widely pro­jected that China’s new en­ergy ve­hi­cle sales will reach 1.2 mil­lion in 2018, ac­count­ing for nearly half of the global mar­ket. In 2019 and 2020, the sales of new en­ergy ve­hi­cles will main­tain the up­ward trend,” said Sun Naiyue, an in­dus­trial an­a­lyst with re­search firm Analysys.

Mar­ket ex­pec­ta­tions are based on China’s de­ci­sion to open fur­ther and China’s de­mand for au­to­mo­biles, an­a­lysts said.

For ev­ery 1,000 Chi­nese peo­ple, there are only 156 cars, sig­nif­i­cantly fewer than in the United States (797) and Ja­pan (591), Sun said.

The ar­rival of Tesla is ex­pected to cause weaker com­pa­nies in China’s new en­ergy ve­hi­cle mar­ket to im­prove their com­pet­i­tive­ness, Zhang said. “If Tesla’s lo­cally pro­duced cars are priced in the same way as in the US, they will force other com­pa­nies to cut prices and im­prove qual­ity, thus ben­e­fit­ing the seg­ment as a whole.” –